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federal
Reserve Bank
DALLAS. TEXAS
of
Dallas
75222
Circular No. 80-104
M a y 29, 1980
MODIFICATIONS TO CREDIT RESTRAINT PROGRAMS
TO ALL BANKS,
BANK HOLDING COMPANIES,
AND OTHERS CONCERNED IN THE
ELEVENTH FEDERAL RESERVE DISTRICT:
Enclosed is information on modifications announced by the Board of
Governors to the credit restraint programs initiated in March 1980. These
changes affect the marginal reserves on managed liabilities, the consumer credit
restraint program, the special deposit requirement on short-term financial
institutions, and the Special Credit Restraint Program.
For further information, please contact Richard D. Ingram, Ext. 6333,
or Helen E. Holcomb, Ext. 6166.
Sincerely yours,
Ernest T. Baughman
President
Enclosures
Banks and others are encouraged to use the following incoming W A T S numbers in contacting this Bank:
1-800-442-7140 (intrastate) and 1-800-527-9200 (interstate). For calls placed locally, please use 651 plus the
extension referred to above.
This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org)
For immediate release
May 22, 1980
Evaluation of recent banking and other credit data, including trends in
consumer credit, indicate that current developments are well within the framework
of the basic monetary and credit objectives of the Federal Reserve and the special
measures of credit restraint established last March 14.
The Federal Reserve is
accordingly modifying and simplifying the administration of the special programs.
These actions do not represent any change in basic monetary policy as
reflected in the targets for restrained growth in money and credit over 1980 that
were developed early this year to help bring inflation under control.
The actions announced today are consistent with the intent to phase out
those special and extraordinary measures only as conditions clearly permit.
the basic framework of the special March measures remain.
Therefore,
These were established
in part in conjunction with the action of the President to invoke certain provisions
of the Credit Control Act of 1969.
Actions taken by the Board are:
— A reduction in the marginal reserve requirement on managed liabilities
of large member banks and agencies and branches of foreign banks from 10 percent to
5 percent, and an upward adjustment of 7-1/2 percent in the base upon which the
reserve requirement is calculated.
--A reduction in the special deposit requirement on managed liabilities
of large nonmember institutions from 10 percent to 5 percent, together with a
similar upward adjustment in their base.
--A decrease from 15 percent to 7-1/2 percent in the special deposit
requirement that applies to increases in covered coWu&fer credit.
-2 --A decrease from 15 percent to 7-1/2 percent in the special deposit
requirement that applies to increases in covered assets of money market mutual
funds and other similar institutions.
— Modification of the Special Credit Restraint Program to ensure that
more urgent credit needs are being met— such as those for small business, auto
dealers and buyers, the housing market, agriculture and energy products and
conservation— and to reduce reporting burdens as described in the attached letter
to the Chief Executive Officer of commercial banks.
The lower marginal reserve requirement on the managed liabilities of
member banks and foreign agencies and branches will apply to liabilities
effective with the statement week of May 29-June 5.
Effective that
week also, the marginal reserve base will be increased by 7-1/2 percent above
the base used to calculate the marginal reserve in the statement week of May 14
21.
Declines in outstanding loans to foreigners will continue, as before, to
reduce the base in subsequent weeks.
The upward adjustment does not apply to
the $100 million minimum base amount.
The same effective date and adjustment in base will apply to nonmember
banks subject to the special deposit requirement on increases in managed liabilities.
The new special deposit requirement on covered consumer credit will be
effective beginning with the average amount of credit outstanding in June, with
the special deposit due July 24.
For money market funds, the new requirement
will be effective with assets in the week beginning June 16, and the deposit will
be maintained in the week beginning June 30.
-0-
Attachment
TITLE 12 —
CHAPTER II —
SUBCHAPTER A —
BANKS AND BANKING
FEDERAL RESERVE SYSTEM
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
[Docket No. R-0300]
Part 229 - Credit Restraint
[Subpact A]
Consumer Credit
AGENCY:
Board of Governors of the Federal Reserve System.
ACTION: Final Rule.
SUMMARY: On March 14, 1980, the Board adopted a consumer credit restraint
program (12 C.F.R. Part 229, Subpart A; 45 Fed. Reg. 17927,March 19,
1980) that requires certain creditors that extend certain types of con
sumer credit to maintain a special deposit with the Federal Reserve
equal to 15% of the amount by which the creditor's outstanding covered
credit during a month exceeds the creditor's base. The purpose of the
program was to curb inflationary pressures in the economy by restraining
the growth of consumer credit covered by the regulation through the
imposition of the special deposit requirement.
Recent trends in the
growth of consumer credit indicate that modification of the Board's
consumer credit regulation would be appropriate.
The Board has therefore
amended its consumer credit restraint regulation to reduce the special
deposit requirement to an amount equal to 7 1/2% of the amount by which
a creditor's outstanding covered credit during a month exceeds its base.
EFFECTIVE DATE:
July 24, 1980.
FOR FURTHER INFORMATION CONTACT: Robert E. Mannion, Deputy General
Counsel (202/452-3274); Gilbert T. Schwartz, Assistant General Counsel
(202/452-3625); or Margaret L. Egginton, Attorney (202/452-3786); Legal
Division, Board of Governors of the Federal Reserve System, Washington,
D. C. 20551.
SUPPLEMENTARY INFORMATION:
In adopting its consumer credit restraint
regulation, pursuant to the Credit Control Act (12 U.S.C. §§ 1901-1909)
as implemented by Executive Order 12201, the Board adopted 15% of a
creditor's increase in covered credit as the required special deposit
amount because the Board regarded that amount as appropriate to restrain
the growth of covered credit.
Since adoption of the regulation in mid
March, trends in consumer credit have led the Board to conclude that
a reduction in the ratio to be applied in determining the special deposit
requirement is appropriate.
Beginning with the special deposit for
the month of June, 1980, which must be held during the period beginning
July 24, 1980, the amount of the special deposit will be equal to 7 1/2%
of the amount by which the creditor's outstanding covered credit during
the month exceeds the creditor's base.
The Board believes that it is in the public interest to reduce
the burden of its credit restraint program, while maintaining its ef
fectiveness, as promptly as possible, and that publication of this rule
for comment would not serve a useful purpose.
The Board therefore for
good cause finds that the notice and public procedure provisions of
5 U.S.C. § 553(b) with regard to this action are unnecessary and contrary
to the public interest.
Pursuant to its authority under the Credit Control Act (12
U.S.C. § 1901-1901), as implemented by Executive Order 12201, the Board
hereby amends 12 C.F.R. Part 229, Subpart A, effective July 24, 1980,
by substituting the number "73 for the number "15," so that the first
s"
sentence of § 229.4(a) reads as set forth below:
SECTION 229.4 - MAINTENANCE OF SPECIAL DEPOSIT
(a) Each covered creditor shall hold a non-interest bearing
special deposit equal to 7 1/2 per cent of the amount by which
the
average amount of its covered credit outstanding during the month exceeds
its base.
*
System,
*
*
*
*
By order of the Board of Govervors ofthe Federal Reserve
effective May 22, 1980.
(Signed)
Theodore E. Allison
Theodore E. Allison
Secretary of the Board
[SEAL]
TITLE 12— BANKS AND BANKING
CHAPTER II— FEDERAL RESERVE SYSTEM
SUBCHAPTER A— BOARD OF GOVERNORS OF THE FEDERAL
RESERVE SYSTEM
(Docket No. R-0301)
PART 229— CREDIT RESTRAINT
[Subpart B]
Short Term Financial Intermediaries
AGENCY:
Board of Governors of the Federal Reserve System.
ACTION:
Final Rule.
SUMMARY: On March 14, 1980, the Board adopted this Subpart pursuant
to the Credit Control Act (12 U.S.C. §§ 1901-1909) as implemented by
Executive Order 12201 to restrain the expansion of short term credit
through money m arket funds and other similar creditors. This Subpart
subsequently was amended on March 28, 1980.
Based upon an evaluation
of recent credit data, the Board has determined to decrease the special
deposit ratio from 15 per cent to 7-1/2 per cent for creditors subject
to this Subpart.
EFFECTIVE DATE: This action is effective for special deposits required
to be maintained during the seven-day maintenance period beginning June 30,
1980, for the computation period beginning June 16, 1980.
FOR FURTHER INFORMATION CONTACT: Gilbert T. Schwartz, Assistant General
Counsel (202/452-3625), qr Daniel L. Rhoads, Attorney (202/452-3711),
Legal Division, Board of Governors of the Federal Reserve System, Washington,
D.C.
20551.
SUPPLEMENTARY INFORMATION: On March 14, 1980, the Board adopted this
Subpart pursuant to the Credit Control Act (12 U.S.C. §§ 1901-1909)
as implemented by Executive Order 12201 to restrain the expansion of
short term credit through money market funds and similar creditors (45
Fed. Reg. 17930). This Subpart subsequently was amended by the Board
on March 28, 1980 (45 Fed. Reg. 23642). Based upon an evaluation of
current credit data, the Board has determined to decrease the special
deposit ratio from 15 per cent to 7-1/2 per cent for all creditors covered
by this Subpart.
The decreased ratio will be effective for special
deposits required to be maintained during the maintenance period beginning
June 30, 1980, for the computation period beginning June 16, 1980.
-2 In order to achieve the objectives of this action more quickly,
the Board for good cause finds that the notice and public procedure
provisions of 5 U.S.C. § 553(b) with regard to these actions are impracticable
and contrary to the public interest.
Pursuant to its authority under the Credit Control Act (12
U.S.C. §§ 1901-1909) the Board hereby amends Subpart B of its Credit
Restraint regulation (12 C.F.R. Part 229) effective June 30, 1980, as
follows:
1. In section 229.14(a)(1), by striking "15" and inserting
in its place "7-1/2".
2. In section 229.14(b), by striking "15" and inserting in
its place "7-1/2".
By order of the Board of Governors of the Federal Reserve
System, May 23, 1980.
(Signed)
Theodore E. Allison
Theodore E. Allison
Secretary of the Board
[SEAL]
TITLE 12— BANKS AND BANKING
CHAPTER II— FEDERAL RESERVE SYSTEM
SUBCHAPTER A — BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
(Docket No. R-0302)
PART 229— CREDIT RESTRAINT
[Subpart C]
Nonmember Commercial Banks
AGENCY:
Board of Governors of the Federal Reserve System.
ACTION:
Final rule.
SUMMARY:
Pursuant to the Credit Control Act (12 U.S.C. §§ 1901-1909)
as implemented by Executive Order 12201 the Board adopted provisions
on March 14, 1980, requiring commercial banks that are not members of
the Federal Reserve System to maintain a non-interest bearing special
deposit with the Federal Reserve equal to 10 per cent of the amount
by which the total of managed liabilities of those banks exceeds the
amount of such managed liabilities outstanding during a base period.
Based upon an evaluation of recent banking and credit data, the Board
has determined to decrease the special deposit ratio from 10 per cent
to 5 per cent and increase, generally, an institution's managed liabilities
base.
EFFECTIVE DATE: This amendment will be effective for the special deposit
required to be maintained by nonmember commercial banks for the sevenday period beginning June 12, 1980, for the computation period beginning
May 29, 1980.
FOR FURTHER INFORMATION CONTACT: Gilbert T. Schwartz, Assistant General
Counsel (202/452-3625), Paul S. Pilecki, Attorney (202/452-3281), or
Daniel L. Rhoads, Attorney (202/452-3711), Legal Division, Board of
Governors of the Federal Reserve System, Washington, D.C. 20551.
SUPPLEMENTARY INFORMATION: On March 14, 1980, the Board adopted this
Subpart pursuant to the Credit Control Act (12 U.S.C. §§ 1901-1909)
as implemented by Executive Order 12201 (45 Fed. Reg. 17932).
This
Subpart requires commercial banks that are not members of the Federal
Reserve System to maintain a special non-interest bearing deposit with
the Federal Reserve equal to 10 per cent of the total by which managed
liabilities of the nonmember bank exceeded the amount of such managed
liabilities outstanding during a base period.
Additionally, this Subpart
requires a covered bank that was a net borrower of managed liabilities
-2-
during the fourteen-day base period ending March 12, 1980, to reduce
its base by an adjustment for the reduction in its foreign lending from
domestic offices.
The adjustment for any given computation period is
based on the difference between the sum of its gross loans to non-United
States residents and gross balances due from foreign offices of other
institutions, and the lowest gross total of such lending for any computation
week beginning after March 19, 1980.
That difference is then rounded
down to the largest lower multiple of $2 million and subtracted from
the daily average of managed liabilities for the base period.
This
Subpart does not apply to United States branches and agencies of foreign
banks with total world-wide consolidated bank assets in excess of $1
billion that are subject to the Board's marginal reserve requirements
(12 C.F.R. § 204.5(f)).
Other United States branches and agencies of
foreign banks are subject to this Subpart.
Based upon an evaluation of recent banking and credit data,
the Board has determined to decrease the special deposit ratio for banks
subject to this Subpart from 10 per cent to 5 per cent.
The new 5 per
cent deposit ratio will be effective for special deposits required to
be maintained for the seven-day period beginning June 12, 1980.
The
corresponding computation period is the seven-day period beginning May 29,
1980.
The Board has also determined to allow certain covered banks
to make a one-time only increase in their managed liabilities base.
For a covered bank that was a net borrower of managed liabilities in
excess of $100 million on a daily average basis during the fourteenday period ending March 12, 1980, its managed liabilities base will
be increased by 7-1/2 per cent. The new base will be determined by
multiplying the bank's base reported on line 8 of form F.R. 2412d for
the computation period beginning May 15, 1980, by 1.075.
However, a
bank that was a net borrower of managed liabilities during the fourteenday period ending March 12, 1980, whose base on March 12, 1980, was
$100 million may not increase its base.
The managed liabilities base will continue to be reduced in
computation periods after May 28, 1980, by the amount by which the bank's
daily average of gross loans to non-United States residents and gross
balances due from foreign offices of other institutions during the statement
week is lower than the lowest daily average amount of such loans and
balances outstanding during the base period or any statement week for
the period from March 13, 1980 to May 28, 1980.
The base for an institution
that was a net borrower of managed liabilities during the base period
(February 28 - March 12, 1980)
will not be reduced below $100 million.
The base will not change for a bank that was a net lender
of managed liabilities during the period February 28 - March 12, 1980.
-3 -
In order to achieve the objectives of this action more quickly,
the Board for good cause finds that the notice, public procedure, and
deferral of effective date provisions of 5 U.S.C. § 553(b) with regard
to these actions are impracticable and contrary to the public interest.
Pursuant to
its authority under the Credit Control Act (12
U.S.C.
§§ 1901-1909),
the Board hereby amends Subpart C of its Credit
Restraint regulation (12 C.F.R. Part 229) effective June 12, 1980, as
follows:
SECTION 229.24--MAINTENANCE OF SPECIAL DEPOSIT
(a) During the seven-day maintenance period beginning June 12,
1980, and each deposit maintenance period thereafter, each covered bank
shall maintain a non-interest bearing special deposit equal to 5 per
cent of the amount by which the daily average of its total managed liabilities
during the seven-day computation period ending eight days prior to the
beginning of the corresponding seven-day maintenance period exceeds
its managed liabilities base as determined in accordance with paragraph (b).
*
★
*
(b) Managed liabilities base. During the seven-day deposit
computation period beginning May 29, 1980, and during each seven-day
deposit computation period thereafter, the managed liabilities base
of a covered bank shall be determined as follows:
(1)
For a covered bank that, on a daily average basis,
was a net borrower of total managed liabilities during the
fourteen-day base period ending March 12, 1980, its base for
the computation period beginning May 29, 1980, shall be equal
to its base reported for the computation period beginning
May 15, 1980 (as reported on line 8 of form F.R. 2412d) multiplied
by 1.075.
However, a covered bank whose base has never exceeded
$100 million shall not multiply its base by 1.075.
The managed
liabilities base of a covered bank shall be reduced by the
amount by which its lowest daily average of
(A)
gross loans to non-United States residents-^
and
3/ A United States resident is:
(a) any individual residing (at the
time the credit is extended) in any State of the United States or the
District of Columbia; (b) any corporation, partnership, association
or other entity organized therein ("domestic corporation"); and (c)
any branch or office located therein of any other entity wherever organized.
Credit extended to a foreign branch, office, subsidiary, affiliate or
other foreign establishment ("foreign affiliate") controlled by one
or more such domestic corporations will not be deemed to be credit extended
to a United States resident if the proceeds will be used in its foreign
business or that of other foreign affiliates of the controlling domestic
corporation(s).
-4 -
(B) gross balances due from foreign offices of
other institutions-^ or institutions the time deposits
of which are exempt from the rate limitations of Regulation Q
pursuant to § 217.3(g) thereof,—
outstanding during any computation period beginning after
May 28,1980, is lower than the lowest daily average amount
of such loans and balances outstanding during the base period
or any computation period between March 13, 1980 and May 28,
1980.
The amount of the reduction shall be rounded down to
the largest lower multiple of $2 million. However, in no
event will the managed liabilities base for a covered bank
that was a net borrower of managed liabilities during the
fourteen-day base period ending March 12, 1980, be less than
$100 million.
(2)
For a covered bank that, on a daily average basis,
is a net lender of total managed liabilities during the fourteenday base period ending March 12, 1980, its managed liabilities
base shall be the sum of its daily average negative total
managed liabilities and $100 million.
4/ Any banking office located outside the States of the United States
and the District of Columbia of a bank organized under domestic or foreign
law.
5/ A foreign central bank, or any international organization, of which
the United States is a member, such as the International Bank for Reconstruc
tion and Development (World Bank), International Monetary Fund, InterAmerican Development Bank, and other foreign international, or supranational
entities exempt from interest rate limitations under § 217.3(g)(3) of
Regulation Q (12 C.F.R. § 217.3(g)(3)).
By order of the Board of Governors of the Federal Reserve
System, May 27, 1980.
(Signed)
Theodore £. Allison
Theodore E. Allison
Secretary of the Board
[SEAL]
TITLE 12— BANKS AND BANKING
CHAPTER II— FEDERAL RESERVE SYSTEM
SUBCHAPTER A— BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
(Docket No. R-0303)
PART 229-CREDIT RESTRAINT
[Subpart D]
Reports Under Special Credit Restraint Program
AGENCY:
Board of Governors of the Federal Reserve System.
ACTION;
Final rule.
SUMMARY:
Pursuant to the Credit Control Act (12 U.S.C. §§ 1901-1909)
as implemented by Executive Order 12201, under its Special Credit
Restraint Program issued on March 14, 1980, the Board has amended its
regulation to enable it to reduce the reporting burden on U.S. commercial
banks, and U.S. branches and agencies of foreign banks, finance companies,
U.S. bank holding companies, and to discontinue the reporting require
ments for large corporate borrowers.
EFFECTIVE DATE:
May 27, 1980.
FOR FURTHER INFORMATION CONTACT: Gilbert T. Schwartz, Assistant General
Counsel (202/452-3625), Bronwen Mason, Senior Attorney (202/452-3564)
Legal Division, or Eleanor J. Stockwell, Senior Deputy Associate Director
(202/452-3651), Division of Research and Statistics, Board of Governors
of the Federal Reserve System, Washington, D.C. 20551.
SUPPLEMENTARY INFORMATION: On March 14, 1980, the Board announced
a Special Credit Restraint Program designed to encourage lenders and
borrowers, in their individual credit decisions, to take specific account
of the overall aims and quantitative objectives of the Federal Reserve
in restraining growth in money and credit generally. While compliance
with the Program guidelines is on a voluntary basis, the Board instituted
a reporting program, as authorized by section 1-104 of Executive Order
12201, to monitor developments in the credit markets and compliance
with the Program.
Under this reporting program the affected lenders
were required to provide data periodically concerning types and amounts
of outstanding loans and selected corporations were required to provide
data on certain types of borrowing.
(45 Fed. Reg. 22883).
Based on an evaluation of recent banking and credit data,
on May 22, 1980, the Board announced that it would reduce the reporting
burden on U.S. conmercial banks, U.S branches and agencies of foreign
banks, finance companies, and U.S. bank holding companies, which
-2-
should now file reports on a bimonthly basis.
In addition,
the Board
stated that it would discontinue reports by large corporate borrowers.
The first quarterly report for intermediate size banks due in June,
will be simplified, and the need for subsequent reports will be evaluated
after that checkpoint is passed.
In order to achieve the objectives of this action more quickly
the Board for good cause has determined that the notice and public
procedure provisions of 5 U.S.C. § 553(b) with regard to this action
are not in the public interest, and will not be followed.
Pursuant to
U.S.C.
§§ 1901-1909)
has amended sections
Restraint Regulation
its authority under the Credit Control Act (12
as implemented by Executive Order 12201 the Board
229.33 and 229.34 of Subpart D of its Credit
(12 C.F.R. § 229) to read as follows:
SUBPART D - Reports under Special Credit Restraint Program
*
*
*
*
*
SECTION 229.33— REPORTS BY LARGE LENDERS
(a) Large Commercial banks. Each U.S. commercial bank having
U.S. consolidated assets of $1 billion or more shall file such reports
on its activities as may be required by the Board from time to time
on forms prescribed by the Board in accordance with the instructions
thereto.
(b) U.S. agencies and branches of foreign banks. Each family
of U.S. offices of a foreign bank having worldwide banking assets
of
more than $1 billion monthly shall file such reports on its activities
as may be required by the Board from time to time on forms prescribed
by the Board in accordance with the instructions thereto.
(c) U.S. bank holding companies. Each U.S. bank holding
company with U.S. consolidated financial assets of $1 billion or more
shall
file such reports on its activities as may be required by the
Board
from time to time on forms prescribed by the Board in accordance
with the instructions thereto.
(d) U.S. finance companies. Each U.S. finance company with
total business receivables outstanding (that is, all loans excluding
those
made for personal, family or household uses) of $1
billion or
more shall file such reports on its activities as may be required by
the Board from time to time on forms prescribed by the Board in
accordance with the instructions thereto.
-3-
SECTION 229.34— REPORTS BY INTERMEDIATE-SIZED COMMERCIAL BANKS
Each U.S. coimtercial bank with U.S. consolidated assets of
$300 million or more but less than $1 billion shall file such reports
on its activities as may be required by the Board from time to time
on forms prescribed by the Board in accordance with the instructions
thereto.
Board of Governors of the Federal Reserve System, effective
May 27, 1980.
Theodore E. Allison
Secretary of the Board
[SEAL]
TITLE 12 —
CHAPTER II —
BANKS ANO BANKING
FEDERAL RESERVE SYSTEM
SUBCHAPTER A -- BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
[Regulation D]
(Docket No. R-0304)
Part 204 —
RESERVES OF MEMBER BANKS
Marginal Reserve Requirements
AGENCY:
Board of Governors of the Federal Reserve System.
ACTION:
Final rule.
SUMMARY: On October 6, 1979, the Board of Governors amended Regulation D
to establish an 8 per cent marginal reserve requirement on the amount
by which the total of managed liabilities of member banks (and Edge
and Agreement Corporations) and certain United States branches and agencies
of foreign banks exceeds the amount of an institution's base of managed
liabilities.
On March 14, 1980, the Board acted to increase the marginal
reserve requirement ratio from 8 to 10 per cent and to reduce an institution's
managed liabilities base by the greater of 7 per cent or by the amount
of reduction in an institution's gross loans to non-United States residents
and balances due from foreign offices of other institutions.
Based
upon an evaluation of recent banking and other credit data, the Board
has determined to decrease the marginal reserve requirement ratio to
5 per cent and, generally, to increase the managed liabilities base
of an institution by 7-1/2 per cent.
EFFECTIVE DATE: This action is effective for marginal reserves required
to be maintained during the seven-day period beginning June 12, 1980,
against total marginal managed liabilities outstanding during the sevenday period beginning May 29, 1980.
FOR FURTHER INFORMATION CONTACT: Gilbert T. Schwartz, Assistant General
Counsel (202/452-3625), or Paul S. Pilecki, Attorney (202/452-3281),
Legal Division, Board of Governors of the Federal Reserve System, Washington,
D. C. 20551.
SUPPLEMENTARY INFORMATION: On October 6, 1979, the Board of Governors
amended Regulation D (12 CFR Part 204) to impose a marginal reserve
requirement of 8 per cent on the amount by which the total managed liabilities
of member banks (and Edge and Agreement Corporations) and United States
branches and agencies of foreign banks with total worldwide consolidated
bank assets in excess of $1 billion exceeds the amount of the institution's
managed liabilities outstanding during the base period (September 13
26, 1979) or $100 million, whichever is greater (44 Fed. Reg. 60071).
On March 14, 1980, the Board acted to increase the marginal reserve
ratio to 10 per cent and to adjust the base of managed liabilities (45
Fed. Reg. 17924). Managed liabilities include the total of (1) time
deposits in denominations of $100,000 or more with original maturities
of less than one year; (2) Federal funds borrowings with original maturities
of less than one year from U. S. offices of depository institutions
not required to maintain Federal reserves and from U. S. government
agencies; (3) repurchase agreements with original maturities of less
than one year on U. S. government and agency securities entered into
with parties other than institutions required to maintain Federal re
serves; and (4) Eurodollar borrowings from foreign banking offices,
asset sales to related foreign offices and member bank foreign office
loans to U. S. residents.
The purposes of these actions were to better
control the expansion of bank credit, help curb speculative excesses
in financial, foreign exchange and commodity markets and thereby serve
to dampen inflationary forces.
Based upon an evaluation of recent banking and other credit
data, the Board has determined to decrease the marginal reserve requirement
ratio to 5 per cent.
This reduction will take place for the reserve
maintenance period beginning on Thursday, June 12, 1980.
In addition,
the Board has determined to adjust the base amount of managed liabilities
for institutions subject to the marginal reserve requirement program.
For the reserve computation period beginning May 29, 1980, if an institution
was a net borrower of managed liabilities during the fourteen-day period
ending September 26, 1979, its managed liabilities base shall be the
lesser of its managed liabilities base for the reserve computation week
ending May 21, 1980, as reported on line 8 of Form FR 2414d, multiplied
times 1.075 or its daily average total managed liabilities during the
fourteen-day period ending September 26, 1979.
For example, if an institution
has a reported managed liabilities base for the computation period ending
May 21, 1980, of $100 million, its new base would be $107.5 million
(107.5 per cent times $100 million).
However, if such institution's
daily average total managed liabilities for the fourteen-day period
ending September 26, 1979, was $105 million, then the new managed liabilities
base of such institution would be $105 million, because the managed
liabilities base cannot be increased above the September amount.
The managed liabilities base will continue to be reduced in
computation periods after May 28, 1980, by the amount by which the institution'
daily average of gross loans to non-United States residents and gross
balances due from foreign offices of other institutions during the statement
week is lower than the lowest daily average amount of such loans and
balances outstanding during any statement week for the period from March 6,
1980 to May 28, 1980.
The base for an institution that was a net borrower
of managed liabilities during the base period (September 13-26, 1979),
will not be reduced below $100 million. The base will not change for
an institution that was a net lender of managed liabilities during the
period September 13-26, 1979.
-3-
In order to achieve the objectives of this action more quickly,
the Board for good cause finds that the notice, public procedure, and
deferral of effective date provisions of 5 U.S.C. § 553(b) with regard
to this action is impracticable and contrary to the public interest.
These actions are taken pursuant to the Board's authority
under sections 19, 25 and 25(a) of the Federal Reserve Act (12 U.S.C.
§§ 461, 601 et seq.) and under section 7 of the International Banking
Act of 1978 (12 U.S.C. § 3105).
Effective June 12, 1980, section 204.5 of Regulation 0 (12 CFR 204.5)
is revised as follows:
§ 204.5
RESERVE REQUIREMENTS
*
(f)
*
*
*
*
Marginal Reserve Requirements.
(1) Member banks. A member bank shall maintain a daily average
reserve balance against its time deposits equal to 5 per cent of the
amount by which the daily average of its total managed liabilities during
the seven-day computation period ending eight days prior to the beginning
of the corresponding seven-day reserve maintenance period exceeds the
member bank's managed liabilities base as determined in accordance with
subparagraph (3) . * * *
(2) United States branches and agencies of foreign banks.
A United States branch or agency of a foreign bank with total worldwide
consolidated bank assets in excess of $1 billion shall maintain a daily
average reserve balance against its liabilities equal to 5 per cent
of the amount by which the daily average of its total managed liabilities
during the seven-day computation period ending eight days prior to the
beginning of the corresponding seven-day reserve maintenance period
exceeds the institution's managed liabilities base as determined in
accordance with subparagraph (3). * * *
(3) Managed liabilities base. During the seven-day reserve
computation period beginning May 29, 1980, and during each seven-day
reserve computation period thereafter, the managed liabilities base
of a member bank or a family of United States branches and agencies
of a foreign bank ("family") shall be determined as follows:
(i)
For a member bank or family that, on a daily average
basis, is a net borrower of total managed liabilities during the fourteenday base period ending September 26, 1979, its managed liabilities base
shall be the lesser of the reported managed liabilities base for the
reserve computation period ending May 21, 1980, (Form FR 2414d, line 8)
4
-4multiplied times 1.075, or the daily average of its total managed liabilities
during the fourteen-day period ending September 26, 1979.
For each
computation period beginning after May 28, 1980, the managed liabilities
base of a member bank or family shall be reduced during the computation
period by the amount by which its lowest daily average of
(A)
(B)
18/
gross loans to non-United States residents—
and
gross balances due from foreign offices of
other institutions—
or institutions, the
time deposits of which are exempt from the
rate limitations of Regulation Q pursuant to
§ 217.3(g) thereof,—
outstanding during any computation period beginning after May 28, 1980,
is lower than the lowest daily average amount of such loans and balances
outstanding during any computation period between March 6, 1980, and
May 28, 1980.
The amount representing such difference shall be rounded
to the next lowest multiple of $2 million.
In no event will the managed liabilities base for an institution
that was a net borrower of managed liabilities during the fourteen-day
base period ending September 26, 1979, be less than $100 million.
(ii)
For a member bank or family that, on a daily average
basis, is a net lender of total managed liabilities during the fourteenday base period ending September 26, 1979, its managed liabilities base
18/ A United States resident is:
(a) Any individual residing (at the
time the credit is extended) in any State of the United States or the
District of Columbia; (b) any corporation, partnership, association
or other entity organized therein ("domestic corporation"); and (c)
any branch or office located therein of any other entity wherever organized.
Credit extended to a foreign branch, office, subsidiary, affiliate or
other foreign establishment ("foreign affiliate") controlled by one
or more such domestic corporations will not be deemed to be credit extended
to a United States resident if the proceeds will be used in its foreign
business or that of other foreign affiliates of the controlling domestic
corporation(s).
19/ Any banking office located outside the States of the United States
and the District of Columbia of a bank organized under domestic or foreign
20/ A foreign central bank, or any international organization of which
the United States is a member, such as the International Bank for Reconstruction
and Development (World Bank), International Monetary Fund, Inter-American
Development Bank, and other foreign international, or supranational
entities exempt from interest rate limitations under § 217.3(g)(3) of
Regulation Q (12 CFR 217.3(g)(3)).
-5-
shall be the sum of its daily average negative total managed liabilities
and $100 million.
,
By order of the Board of Governors of the Federal Reserve
System, May 2 1 1980.
(signed)
Theodore E. Allison
Theodore E. Allison
Secretary of the Board
[SEAL]
BOARD □ F GOVERNORS
□ FTHE
FED ER AL R E S E R V E S Y S T E M
W A S H I N G T O N , D. C. 3 0 S S I
P A U L A. V O L C K E R
CH AI RMAN
May 22, 1980
To the Chief Executive Officer of Banking Institutions:
Preliminary review of reports of large banks under the
Special Credit Restraint Program, together with analysis of
other banking data, now indicates that bank loans appear to
be running comfortably within the 6 to 9 percent guideline
set forth in the Special Credit Restraint Program. More
over, the most recent data suggest the rate of growth has
been at a significantly reduced pace, and some categories
of loans, such as consumer loans, have actually been falling.
As you will recall, the 6-9 percent guideline was
directly related to the objectives and targets set by the
Federal Reserve to achieve restrained growth in the overall
supply of money and credit during 1980 for the nation as a
whole. While present trends appear fully consistent with
reaching those goals, we recognize individual banks, or
banks in some regions of the country, may face conditions
that make it particularly difficult to meet the Quantitative
guidelines while fully respecting the qualitative guidelines.
In that- connection, the admin istr at ion of the program will
henceforth reflect the following criteria. These criteria
are broadly consistent with the existing program, but are
designed to provide for individual banks facing local con
ditions that may inhibit their ability to meet the overall
objectives:
C l)
Lending by small banks as a group (those under $100
million of deposits) has clearly been within the
quantitative guidelines. Those banks should not
feel under any special restraint in meeting the
needs of their regular local customers, consistent
with their individual capital and liquidity require
ments. In particular, the program is not designed
to exert restraint on agricultural, small business,
home construction and improvement (including energy
conservation), home mortgage, and auto-related credit.
Small banks that find their lending exceeding the
general guideline should refrain from extending
their normal lending area or participating in larger
credits to those with other potential sources of
funds.
-2 -
(2)
Larger banks, consistent with the program, are
also expected to treat loan requests from farmers,
small businessmen, homebuilders, homebuyers (including
home improvement and energy conservation loans),
and auto dealers and buyers in a normal manner —
that is, consistent with the banks' credit standards
and liquidity and capital needs. Customers particularly
dependent on bank financing and enlarging production
capability in response to urgent needs, such as energy,
may warrant accommodation. If in meeting these needs,
total loans appear to be risii\g to or above the 9%
guideline, banks are expected to restrain loans to
other borrowers, including those with access to other
sources of funds and those outside the normal lending
area. Banks respecting these priorities finding their
total loans rising faster than consistent with the 9
percent guideline will be expected to demonstrate that '
their policies are consistent with these priorities in
their reports and reviews with the regional Federal
Reserve Banks. Banks will be justified in exceeding
the quantitative guidelines when such a demonstration
can be made.
(3)
All banks are requested, as before, to avoid use of
available credit resources to support essentially
speculative uses of funds, or to finance transactions
such as takeovers or mergers that can reasonably be
postponed and that do not contribute to eonomic
efficiency or productivity.
(4)
The Board will continue to monitor the program through
special reports and evaluation of the continuous flow
of data on bank loans that it obtains through its
regular reporting channels. To reduce the administrative
burden of the program, however, the number of special
reports will be reduced. Reports from large banks will
henceforth be obtained on a bi-monthly rather than a
monthly basis. Reports from large corporate borrowers
will be discontinued. The first quarterly report from
intermediate-size banks will be simplified, and the need
for any further report will be considered after that
check point is passed. As before, no reports will be
required from small banks.
Sincerely,
Paul A. Volcker
@FedFRASER